Capacity Fight

After a normal holiday lull, the steel industry was at capacity again last week, and new orders were piling up faster than ever. Automakers competed in the market. Pennsylvania Railroad announced a car-building program ($17,500,000 worth) that would require some 80,000 tons of steel; Union Pacific announced one almost as large. Steel's backlog grew bigger than ever, pushed delivery dates on new orders well into 1941's second quarter. Hence one of the hottest questions in Washington--should steel expand its capacity?--grew hotter than ever.

The New Dealers wanted more capacity, and wanted it fast. Steelmakers, fearful of a post-war glut, did not. The New Dealers had already detonated one study on the necessity of expansion--Professor Melvin de Chazeau's, calling for 8-10,000,000 more tons. Last week they exploded another; a study by their unofficial National Economic & Social Planning Association foresaw a 1942 increase of 18,000,000 tons in Britain's needs alone.

The steelmen fired back. Their stand: the U. S. has plenty of capacity already, and if it hasn't, let civil needs be curtailed, the supply rationed. They cited one of their tribal elders, Cleveland Trust Co.'s economic essayist Colonel Leonard P. Ayres, who has turned up as chief statistician of the War Department, and who last month told the Cleveland Chamber of Commerce that in most cases erection of new plants or additions should be avoided if possible. Last week they found further support in an unexpected quarter: C. I. O.'s Philip Murray. Charging that a handful of insiders (notably non-union Bethlehem) were hogging defense business, he claimed that 3,000,000 tons of capacity were still lying idle in smaller plants (like Granite City, Lukens). Somewhat uncomfortably, the Iron & Steel Institute accepted Murray's support in the expansion battle, admitted his charge was just.

To put off bloodshed a little longer, the Defense Commission last week announced a new arbitrato, Gano Dunn, the $1-a-year engineer (J. G. White Engineering Corp.) who had already helped arbitrate a TVA expansion fight last summer, was appointed to study the pros & cons of new steel capacity. On the spot was Defense Priorities Commissioner Ed Stettinius, who is trying as hard as any other businessman to get along with the New Deal. Last week, as a gesture toward the wishes of his steelmaking friends, he appointed a five-man steel priorities board--the first step toward rationing in steel. But as though he wished also to placate the New Dealers, he named as its chairman no tough-minded steelman, but a college president--Dartmouth's Ernest Martin Hopkins.

Awaiting the Dunn report, the steel-capacity battle took a recess. Meanwhile, on another front, the New Deal and steelmen worked hand in hand. To Baltimore went 500 scrap dealers for their annual convention last week. When they gathered, the price of No. 1 steel scrap was $23.50 a ton, and heading up. Up rose Price Commissioner Leon Henderson, addressed the scrapmen like a Dutch uncle. Said he, referring to his deal with the scrapmen last fall: "The Government didn't ask for a written guarantee. We went away from the meeting with the feeling that we would get a large volume of scrap at decent prices but . . . the price has been inching up and inching up, and the required quantities of scrap have not been coming out. . . . We will not let scrap run to $40 or $50 or $60 just because somebody believes that is the way to get out the available tonnage." Henderson made it plain that $20 a ton was his idea of a fair ceiling.

With him at Baltimore was Businessman William Loren Batt, the SKF (ball bearings) president who is a Stettinius deputy commissioner. Mr. Batt was no less downright with the scrapmen than New Dealer Henderson. Said he: "I see it as your patriotic duty to receive and sell as much scrap as you can and as rapidly and cheaply as possible. . . . The President has said that the nation would be intolerant of strikes that tie up defense business. I think he would add, were it not obvious, that the nation will be equally intolerant of careless, selfish management."

While the scrap dealers had less to say than usual, steelmen (who have to buy the scrap) applauded. Loudest applause came from National's Ernest Tener Weir, who demanded that the Government force the price down. He also announced a 40% increase in his Weirton pig-iron-making capacity, just in case Government efforts failed to produce enough scrap at reasonable prices. But by week's end, the price of scrap had dropped $1 a ton, was clearly headed back to $20. On one front at least, the Government--with business' help--was having its way.

The U. S. shortage of zinc for defense purposes (TIME, Jan. 6) will not be so acute after American Smelting & Refining Co. completes a new plant announced last week. Place: Texas. Operation date: early 1942. Capacity: 24,000 to 30,000 tons a year.

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